Number of firms set to shed jobs on rise

Published on Monday 11 February 2008 09:24

THERE has been a sharp rise in the number of British companies expecting to cut jobs over the coming months, according to a new report published today.

But Scotland is expected to be among the least-affected areas, according to The Chartered Institute of Personnel and Development (CIPD).

That chimes with another update on the private sector in Scotland which showed the Scottish economy made a "relatively strong" start to 2008.

The CIPD report, which covered 1500 firms, suggests that companies are starting to feel the effects of the recent credit crunch and consumer spending downturn. Among those polled, almost two out of five said they intended to lay off some workers, compared to fewer than one in five last autumn.

And of those expecting to axe staff, which was across all industry sectors, around forty per cent said they could be looking for at least ten staff lay-offs.

The research found redundancy expectations were highest in the east and west Midlands and south-west England, while the least affected areas were set to be Scotland, Wales, Yorkshire and Northern Ireland.

The CIPD's chief economist, John Philpott, said: "Employers' initial reaction to talk of an economic slowdown was to hold fire and take stock of the emerging situation, but a substantial number now expect to trim workforces."

He said tougher trading conditions and higher costs were taking their toll in the private sector, while the need for efficiency savings was behind the drive to shed jobs. But he added: "With net recruitment activity still positive, signs of mounting employer pessimism shouldn't be read as evidence of a jobs market approaching meltdown. But it does suggest that the UK is entering a period of slower employment growth."

Employers said they were even more dissatisfied with the skills of jobseekers and over half expected recruitment difficulties.

Andrew Smith, chief economist at KPMG, which helped with the research, added: "The survey reflects the general uncertainty about the economic outlook."

Meanwhile, the latest Purchasing Managers' Index (PMI) from the Royal Bank of Scotland showed Scotland's economy started 2008 on a positive note with both the manufacturing and service sector registering a rebound.

But many firms were having to rely on existing orders to keep business rolling, according to the January index. RBS senior economist David Fenton said: "The Scottish economy made a relatively strong start to 2008. Growth of business activity in January comfortably exceeded rates posted during the final quarter of last year."

Mr Fenton said the improvement was "broad based" but that "most of the increase in activity was due to work on existing contracts, rather than a weak rise in new business".

Overall, private sector output in Scotland rose to 53.8 last month, from 52.9 in December, marking the fastest increase in business activity for four months. A figure above 50.0 denotes expansion.

But the PMI noted that while new business activity increased in January, the rate of expansion was the slowest in the current 55-month period of growth.